Computing maximally smooth forward rate curves for coupon bonds: An iterative piecewise quartic polynomial interpolation method

Paul Beaumont and Yaniv Jerassy-Etzion ()
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Yaniv Jerassy-Etzion: Department of Economics and Management; Ruppin Academic Center

No wp2011_08_03, Working Papers from Department of Economics, Florida State University

Abstract: We present a simple and fast iterative, linear algorithm for simultaneously stripping the coupon payments from and smoothing the yield curve of the term structure of interest rates. The method minimizes pricing errors, constrains initial and terminal conditions of the curves and produces maximally smooth forward rate curves.

Keywords: Term structure of interest rates; yield curve; coupon stripping; curve interpolation (search for similar items in EconPapers)
JEL-codes: C63 G12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2011-08
New Economics Papers: this item is included in nep-cba and nep-cmp
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